In Microsoft Word 2007, a watermark is a faint image of a picture or text that can be seen behind the main body of a document. This type of marking may be used for a variety of reasons.
If you are preparing a private company memo, you may choose to include the company logo or the word “Confidential” as a watermark for your document to remind readers of the memo’s nature. On the other hand, if your document is a personal letter, you may want to use a watermark as a way of personalizing the note, giving it the appearance of custom stationery.
How to Insert a Watermark
Step 1: On the Page Layout tab, click on the arrow under Watermark. This will open up a new window with several options. (Click on the image below for a larger view.)

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Step 2: You can scroll through the list of predesigned watermarks and see if one there is a good fit for your document. If you find one, click on it and it will appear in your document.
Step 3: If you can’t find a suitable watermark in the list of predesigned ones, click Custom Watermark to begin creation of a new one.

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A dialog box will appear where you can enter specifications for your own watermark design. You can either select Picture watermark and browse through your personal collection of images, or select Text watermark and enter the word or phrase you want to use. If you choose this latter option, you can also modify the default settings, and pick your own font, size, and color. You are restricted to only having one watermark per page.
The watermark will appear on all pages of the printed document. Should you decide later on that you no longer want to use a watermark, you can get rid of it by choosing Remove Watermark from the same menu. You can also use this same process to change an existing watermark to a new one.